Cold Start to the Year as Interest-free Credit Card Competition Stalls

By: MoneyFacts

Entering a new year could open new opportunities to pay back debts, so we typically start to see competition heat up in the 0% balance transfer credit card market. However, so far this year these much-anticipated deals have been put on a bit of a back-burner, as there have been very few launches or improvements in the sector. Since the start of January, only two card providers (AA and Barclaycard) have improved or launched interest-free balance transfer offers.

According to the latest research by moneyfacts.co.uk, in 2017 there was a much larger drive in this arena, with AA, Bank of Scotland, Halifax, Lloyds Bank, M&S Bank, Post Office Money and Virgin Money all improving or launching 0% balance transfer offers, some of which were market-leading at 43-months interest-free. Today, the longest 0% balance transfer term is 38 months with Barclaycard, MBNA and nuba.

In addition, only one card provider has improved its interest-free offer on purchases, with Santander making significant changes to its All in One Mastercard, offering 30-months interest-free on purchases and balance transfers, now with no transfer fee. This time a year ago, AA, M&S Bank, Santander and Virgin Money had already improved or launched 0% purchase offers.

Rachel Springall, Finance Expert at moneyfacts.co.uk, said:

“It seems that the usual boom in interest-free credit card offers has gone a bit stale this year, with very few tantalising offers propelled onto the market to choose from. As it stands today, borrowers looking to take out a balance transfer credit card will find that they have a shorter term to repay any debts. The longest offer a year ago boasted 43-months interest-free for balance transfers, but today, the best deals offer five months less, at 38-months.

“January is also a time for sales and any consumers looking to take advantage of these could turn to a 0% purchase credit card to spread the cost. Once again, unlike last year, not many providers seem to be pushing new deals, with only Santander making an impact by increasing their interest-free deal on the All in One Mastercard to 30 months. The deal is a good combination as it also comes with a cashback incentive and the monthly fee of £3 is waived for 123 current account holders – plus there is no balance transfer fee to pay in the introductory offer, where consumers also get 30 months interest-free.

“While it remains to be the case that consumers have a wide choice of 0% deals, devotion to interest-free offers, typically the longest terms, could well be diminishing for lenders. Instead of offering the longest terms ever seen, providers are competing in other ways, such as reducing their balance transfer fees.

“The market has definitely shifted over the last decade to provide borrowers with a bit of breathing space for their debts, but consumers must ensure they do not use these offers as a crutch for their debt. Striving to make overpayments by sticking to a repayment plan and cutting up excess credit cards will help consumers who can’t fight the urge to spend.

“Will power can be a problem for those consumers struggling to repay their card debts, so they should seek financial help if they can’t cope. Shredding credit card offers that land on the doormat and sending online card offers to junk email could be another way to fight the enticement, but if there is an absolute need, then borrowers should be checking the Best Buys instead of succumbing to marketing ploys.

“When applying for a credit card, customers should preferably have a lustrous credit rating to be eligible for the best deals out there, so it’s a good idea to review their credit score, with Experian for example. At the same time, borrowers need to watch their credit limits and reduce them if it’s excessive, but whatever they do, the number one rule is to never miss a card repayment as it can damage their credit score.”

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